KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Valere Nyaboke, Cliffe Dekker Hofmeyr
Investment Services CMA‑licensed service providers (market intermediar - ies) must inform customers of all applicable fees for their services. They may not deduct fees or charges from a client’s funds, nor may they liquidate a client’s securities to recover fees, unless permitted under the client agreement or as prescribed by the CMA. Market intermediaries include: • stockbrokers; • derivatives brokers; • REIT managers; • trustees; • dealers; • investment advisers; • fund managers; • investment banks; • central depositories; • authorised securities dealers; • authorised depositories; • online forex brokers; • commodity dealers; and • commodity brokers. 2.4 Variations Between the Regulation of Fintech and Legacy Players If the services or products offered by fintechs fall under existing Kenyan regulations, there is no distinc - tion in how fintechs and traditional financial institu - tions are regulated. In such cases, both fintechs and legacy players must obtain the appropriate licence from the relevant regulator before offering the service or product. 2.5 Regulatory Sandbox CMA The Capital Markets Authority (CMA) has established the CMA Regulatory Sandbox, a framework designed to enable live testing of innovative financial products, solutions and services, while placing strong emphasis on investor protection. The Sandbox operates under the Regulatory Sand - box Policy Guidance Note, issued in early 2019, which sets out clear eligibility criteria, application proce - dures, safeguards and testing requirements for firms seeking participation.
After the testing period, the CMA may take one of the following actions. • Grant a full licence or approval to operate in Kenya. • Issue a Letter of No Objection allowing the appli - cant to operate under specific conditions. • Develop new regulations, guidelines or notices if insights from testing indicate a need for broader legal reforms or a new regulatory framework to support innovative business models. • Deny permission to operate where the innovation fails to meet prevailing legal and regulatory stand - ards. Approach to regulation Once a fintech is onboarded into the CMA Sandbox, it must comply with certain minimum regulatory require - ments applicable to all capital markets participants. These include obligations related to preventing money laundering, counter‑terrorism financing and other illicit activities. If a fintech is already licensed by the CMA, the licence continues to apply to all non‑sandbox‑approved activities undertaken by the firm. The CMA may revoke or suspend a participant’s approval to operate within the Sandbox if the fintech: • fails to maintain required safeguards; • submits false information; or • does not address defects or vulnerabilities in its products that result in service disruptions or fraud incidents. CA The Communications Authority (CA) has also estab - lished a regulatory sandbox aimed at fostering innova - tion in Kenya’s ICT sector. The CA Sandbox provides a controlled environment for testing new products and services across areas such as broadcasting, cybersecurity, multimedia, telecommunications and e‑commerce. Its operation mirrors that of the CMA Sandbox, and after testing the CA may:
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